Since the Great
Recession the two major global industries hit the hardest by the economic
downturn were the financial and automotive industries. The economic downturn
created prime conditions for market manipulation. Such conditions were
potentially escalated by a weakened global economy and unwillingness of the
Japanese government to increase oversight of an already desperate, fledgling automotive
industry. Likewise, the South Korean company, Hyundai Motor Group, was not
diligent in their financial accounting of parts and prices. This is a massive
diversion from what made Asian automotive manufacturers break into the global
market: cost effectiveness and process efficiency. Additionally, American
automotive manufacturing has not escaped criticism with companies’
manufacturing plants based in Ohio, for example, pleading guilty to allegations
of fraud and cartel-like behavior.

South
Korea’s antitrust regulator will fine five auto parts firms, including Japan’s
Denso Corporation and NGK Spark Plug, for a total of $3.2 million for fixing
prices and rigging bids for engine parts. It has been largely noted in recent
news that regulators are increasing activity and investigations in a global
crackdown on price-fixing and supplier collusion against the automotive
industry. The price-fixing and supplier collusion allegedly took place between
2008 and 2011. The companies that supplied Hyundai Motor Group and Kia Motors
made up roughly 75% of the local car market in Japan and South Korea. While the
South Korean Fair Trade Commission aggressively insisted that these fines sent
a strict message that collusion and price-fixing will not be tolerated, there
are still many questions regarding the intricacy of the situation that makes
South Korean, Japanese, and perhaps global consumers feel very doubtful. Due to
privacy laws and contractual restrictions, Hyundai Motor Group and KIA Motors
have not released any financial information clarifying the size of the
contracts awarded which would add context to the costs passed onto the
consumers from parts costs being artificially high and how substantial of a
signal this ruling sends to other automotive suppliers.

The
legal and financial ramifications in Asia have had a magnified effect in the
United States with 33 companies pleading guilty and agreeing to pay $2.4
billion in fines. The investigations are still ongoing. States like Ohio are
feeling the brunt of the impact with clusters of Japanese-based companies (that
provided parts to Honda Motor Co.) pleading guilty. These plea agreements are
exposing larger issues within the Japanese automobile manufacturer’s supply
chains and broader business relationships. The ramifications of the conspiracy
cannot be overstated in the United States with more than a decade of
price-fixing across more than 25 million vehicles purchased by United States
consumers.

The story of
American entrepreneur Mike Tanner (highlighted in The
Columbus Dispatch) captures largely what many in
the United States automotive industry are feeling. Tanner spent five years
trying to get Honda Motor Co. to purchase his brake hoses. Eventually, the
company purchased a small share of Tanner’s hoses; of which, he, in hindsight,
believes Honda Motor Co. was using to leverage against other parts suppliers
based in Japan. American entrepreneurs and businesses have largely been
criticized for costly labor and inefficiency; however, the unprecedented
collusion on the part of Japanese suppliers may shift the focus of American
automotive manufacturing from labor costs to product parts and supply chain
management.

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